Consumer Financial Protection Bureau (CFPB). Well intended?? Or, merely an exercise of raw power with no understanding of the dynamics of mortgage borrowing or lending.
In an excellent series of articles by George Souto examines the rule limiting the DTI for mortgage loans, regardless to down payment, to 43%. See: Trying To Add Apples & Oranges Makes For Bad Math
Consider the history of the Veterans Administration home loan benefit for qualified home buyers. While not insured, a percentage of the VA loan is guaranteed by the Veterans Administration. However, following an analysis of the VA borrower's income, benefits, family size, etc. DTI may be as much as 50% (or more). Yet, the VA loan enjoys the lowest default rate of all mortgage loans, including conventional loans with down payments.
George Souto wrote: "This QM rule is well intended".
I dispute that statement.
"Well intended" would require a modicum of expertise in the matter about which one is wielding significant power over millions of citizens. Without the requisite expertise, rule making is no more than an exercise of raw power to express one's personal biases.
In this case, the rule making philosophy of the CFPC and this arbitrary example reveals a contempt for the ability of low to moderate income citizens to have the degree of personal financial management ability to have the right to own real estate.
As with most government rule making in recent years, the rules are meant to exclude as many consumers as possible in the arrogant belief that the role of government is to make personal financial decisions for the ignorant masses.
Personal situations that these rules ignore include but are not limited to:
Spousal income not included in loan applicant's application,
Upward mobility of applicant's earning ability (young professionals),
Trailing spouse's temporary loss of income,
Long term stable W-2 income,
Higher DTI front ratio with no installment debt.
These are just a few examples of credit worthy prospective home buyers who will be denied home ownership because of the ignorance of the CFPB rule making.
Real estate agents and loan officers will be witnesses to the harm this new and unnecessary rule will cause.
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Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988. Serving home buyers in Loudoun County, Virginia.
Lenn Harley, Broker, Realtor, Homefinders.com, 800-711-7988
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